Accounts receivable management refers to the set of policies, procedures and practices employed by a company with respect to the administration of sales offered on credit. It covers the evaluation of credit solvency and credit risk of customers, the establishment of terms of sales and credit policies and the design of an appropriate process of collection of accounts receivable.
Accounts receivable are in the balance sheet of a company and are considered short-term assets. They are one of the pillars of the sales generation and, therefore, must be managed to ensure they eventually translate into cash flows. A company that fails to effectively convert its accounts receivable into cash may find itself in a poor liquidity position, harming its working capital and facing unpleasant operational difficulties.